American Airlines’ New Loyalty Program Makes Big Changes to AAdvantage

Dan Peltier, Skift

- Nov 17, 2015 2:10 pm

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American isn’t going as far as Delta or United did, but its changes are in line with the industry shift to measuring loyalty in dollars spent, not miles flown.

— Dan Peltier

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American Airlines announced today that it would re-invent its AAdvantage loyalty program to offer passengers a hybrid system that rewards loyalty and offers redemption based on both miles flown and the cost of tickets.

American Airlines invented the travel loyalty program, so when its executives make changes to its AAdvantage program, it’s more significant than an update to a program like Southwest’s RapidRewards. American is the last of the legacy carriers to adopt a shift in loyalty policy that began with Delta Air Lines in early 2015. Skift first reported on on the new AAdvantage plans last week.

The changes will take effect “sometime in the second half of 2016, but that does not mean July 1,” said Suzanne Rubin, president of AAdvantage, responding to questions from reporters and analysts during a conference call Tuesday.

The major change is that members will begin earning award miles based on the price of the ticket purchased (base fare plus carrier-imposed fees, excluding government-imposed taxes and fees) and that member’s status level. Members will receive five miles for every U.S. dollar spent on the base fare and carrier-imposed fees. Gold members will receive seven miles, Platinum members will receive eight, and Executive Platinum members will receive 11 miles.

And starting in January, American will change how members quality for elite status for either Elite Qualifying Miles or Elite Qualifying Segments at the same thresholds as today. Elite-qualifying points will be discontinued. Members will earn more Elite Qualifying Miles for purchasing higher fares and Elite Qualifying Segments will still be awarded for each eligible flight segment flown. These particular changes are essentially in-line with what Delta and United have already done this year.

“A significant percentage of our flights are less than 500 miles, so offering a lower MileSAAver option only makes sense for our customers,” Rubin said in a statement, using American’s name for the lowest level of its redemption program. “Other routes will be adjusted to match increased customer demand, including routes that feature our world-class A321T and 777-300ER aircraft.”

Award redemption levels will be calculated on a flown basis, so whatever a passenger’s status is when they fly those actual segments, that will be the multiplier used for that segment. “But let’s say if they were Gold when they purchased the ticket,” Rubin said, “but then they attained Platinum status and they flew that segment as a Platinum member, they would earn at the Platinum rate. So that’s just like it happens today, there’s really no change in the timing for how the miles are earned.”

According to American, in March 2016 some of its award redemption levels will be reduced by as much as 40 percent, and AAdvantage members will continue to book award travel on any day of the year without any blackout dates. For tickets booked on or after March 22, award redemption levels to destinations in Mexico, the Caribbean, and Central America will be reduced, and MileSAAver awards for flights 500 miles or less in the U.S. and Canada will be redeemable for as low as 7,500 miles one way (plus any applicable taxes and carrier-imposed fees).

“Some award levels will go up, others will go down and some will stay the same,” said Rubin. “We’re institutionalizing short-haul redemption award at 7,500 miles. As we’ve combined the two networks, we have a much greater proportion of our flights at this range and we think this is a great way to align the program with the network going forward. On the increase side, we have raised awards, in particular long-haul premium cabin that’s where you will note most of the increase.”

“That increase is a result of a number of things. First is just pure market demand, we are seeing much higher paid premium demand in this arena as well as higher award redemption demand. As we look at the competitive market place we also see higher competitive pricing in these areas. In particular, American has made substantial investments in its products and service in these areas, part of which is fueling the higher demand and as a result we think that the increases are merited [in Europe and Asia].”

“The workhorse of the advantage redemption program is 25,000 mile saver domestic award, and you’ll note that that award level, which represents about 75 to 80% of all awards redeemed remain unchanged for [round-trip flights].”

Rubin said there are no changes to American’s relationships with Citibank and Barclaycard and also responded to a question regarding why American didn’t include a spend threshold in the AAdvantage changes when both Delta and United’s programs have one.

“You can assume that we’ll continue to look at other opportunities to make sure that we’re getting our best customers the best value,” said Rubin. “At this point, [it is what it is in terms of not adding a spend threshold]. You can certainly expect for us to continue to study that element of the program as well.”

American also said in a statement that award miles for most flights marketed by partner airlines will be based on a percentage of the flight distance and the booking code purchased, and will announce more details on partner airlines next year.

Below are six charts outlining the new redemption levels, along with copies of letters American will send to members of each tier of the program: